Nick Christifulli is a retail commercial property builder based in Phoenix. His company leases land plots in prominent locations and prepares them for sale to tenants. However, post-Covid, the market conditions changed and more retailers shifted their operations online. This put Nick in a difficult situation. Rents were due and he was having a hard time finding tenants for vacant properties. Rather than sulking about the predicament, Nick decided to turn the challenge into an opportunity.
He found a piece of land in the heart of Phoenix that would be ideal for a drive-in food court. However, he didn’t have the money to get started. He was short by $614,000. If he doesn’t forward the advance to the landlord in the stipulated time, the opportunity would slip out of his hands. Nick approached Colonial after being turned down by many public banks in the city citing his unhealthy credit score. We assessed his situation and this is what we found out.
Post-Covid Challenges in the Retail Commercial Construction Sector
1. Bricks and mortar stores are out of vogue
Although lockdowns have been lifted in most parts of the world and retail shops are back in action, they haven’t fully recovered from the aftermath of Covid. The months of limitations caused by Covid have changed the way retail stores function. As the retail sector recovers, shops are making conscious efforts to meet the new consumer requirements. This involves shifting operations to digital platforms.
Obviously, this shift reflects in retail property requirements as well.
Retail shops that have moved their operations completely online can afford to give up their physical stores. They don’t have to pay huge rents to keep a physical store in a central location in the city when all they need is a godown in an accessible place to meet their business requirements. In the case of click & collect or click & drive retail stores, the square footage area can be reduced while increasing the godown and parking space.
This made Nick rethink his business strategy.
2. Shifted purchasing behaviors
When it comes to retail consumers, many prefer the human touch that physical stores provide and are keen to rediscover the live shopping experience. But then again, the Covid-induced lockdown has forced many to embrace online shopping. Online shopping offers a wider range of options than in-person shopping as they can afford to have a larger inventory. All they need is a warehouse to keep the stock.
Click & collect or click & drive models of retail stores have successfully blended the two into one catering to customers from both spectrums. Physical stores are now equipped with human sales managers and in-store assistants along with virtual assistants and artificial intelligence systems to meet the demands of both online and offline customers. This way, the pandemic containment measures can be implemented without hampering the smooth functioning of a retail store.
In the restaurant industry, companies like Postmates, Grub Hub, Uber Eats and Door Dash are continuing to disrupt the dining-in concept by acting as a catalyst in food take-out. This encourages food retailers like Chipotle and even smaller mom/pop restaurants to minimize their square footage footprint.
When Nick found an ideally located plot of land at 125 North 44th Street, Phoenix, AZ 85034, with significant walk-ins and traffic, he knew just what he had to do. He was going to build a 15-room drive-in food court. With a vast parking area, the food court would be an excellent place for small groups of families and friends to dine out from the comfort of their cars keeping in line with all safety protocols.
3. Rising price of building materials
If Nick fails to take up the project sooner, he would potentially lose a lot of money.
The fragmented lockdowns last year resulted in a spike in the prices of essential construction materials. Many commercial construction projects which resumed after the first wave of the pandemic came to a standstill due to crises caused by price hikes and shortage in supply. High on-road transportation costs and shipping costs due to Covid restrictions, stringent regulations on movement of vehicles, and functioning of shops can all be cited as reasons for the rise in the price of raw materials. The shortage of laborers due to health issues and lockdowns slows down the project progression and adds to the trouble
4. Administrative hassles and delays
There is a lot of paperwork and formalities to deal with when embarking on a commercial construction project. They often hinder the smooth progress of project development. For example, working with the city on the waterline split or getting permits for TIs can be exhausting. If there are zoning disputes between the commercial property builder and the local city government, things can be even more frustrating.
The delays ultimately increase the cost of construction.
5. Loan delays
Since most construction companies were running in loss during lockdowns and even later, the number of loan applications piled up before banks can be more than what they can handle on their own. As the number of applications increases, the vetting process gets more stringent. When Nick’s loan application was turned down by many banks, dejected, he was on the verge of giving up on the project. If he doesn’t pay the advance on time, there are many potential buyers in line.
Since retail property development can cost a lot, he was apprehensive if a private loan provider would be able to meet his cash requirements on short notice.
Colonial Empowered Nick With an Arizona Bridge Loan
We assessed Nick’s business plan in detail. The food court intends to host reputed food joints including Panera, Thai Chili and Go, Bosa Donuts among others. Being in a prominent location close to the highway, the shops will have no shortage of customers, even late into the night. If Nick completes the project on time, it has the potential to ride the tide to success. Assessing his portfolio, we found out that he was capable of undertaking the project. And he had a large network of reputed business associates from the construction industry.
Although he was a little late on EMI repayments during the lockdown, which affected his credit score, he has rarely had any defaults prior to that. His personal PnL was in good shape despite his low income in the past few months. Moreover, he had profit-making commercial properties in some of the prime locations in the city.
Taking all these factors into consideration, we granted him a $614,000 Arizona bridge loan with 15% interest compounded quarterly in 7 days. This enabled him to pay the advance and get started on the project without any delay. The loan term was fixed at 12 months. Still working through the project, custom loans were set in place. Along with that, biweekly touch bases were implemented to ensure that the construction activities were progressing as planned.
We have helped numerous individuals like Nick get back on track through our financial assistance. If you are looking for a reliable financial partner, contact Colonial Capital today!